Another $45 million of taxpayer money has gone into the Earthquake Commission (EQC), as the cost of re-repairs on botched insurance work tops $405m.
The natural disaster insurance agency is expected to need an additional $140m-plus in bailouts by mid-2020.
The latest payment went through on May 31. It is the third significant top up the Government has given EQC since November, totaling $125m to date. These figures exclude GST.
EQC is being given the money because it has a Crown guarantee – a promised Government bailout in hard financial times that means those insured by EQC would still be covered.
The commission ran out of money last November after paying out for home repairs after the Christchurch and Kaikōura earthquakes. There was $6.4 billion in EQC's natural disaster fund before the Christchurch quakes in 2011.
The top-ups are needed in large part due to the extensive re-repairs EQC had to do on previous insurance work with poor workmanship or missed damage that was not addressed.
EQC has spent $405,394,667 on re-repairs up to June 11. More than $90m of that spend has come since September last year. An unknown amount of re-repair work remains, though EQC previously forecast another $232m will be required.
As of the end of May, EQC was still processing 2037 insurance claims from the Christchurch earthquakes (not including 360 in litigation and 297 jointly managed with Southern Response). These were largely re-repairs to previous insurance work due to poor workmanship or missed damage not being addressed. Through the month of May it settled 819, but another 698 were received.
EQC Minister Megan Woods said she was "deeply concerned and frustrated" about the amount of money required due to the re-repair of EQC jobs not completed properly in the first place.
"Every dollar we are having to spend fixing up a repair job that should have been done right the first time is a dollar we can't spend on schools and hospitals."
She said the previous Government showed "wilful ignorance" about the scale of the problem of botched repairs, and we were now seeing the results years later.
The amount EQC has required so far is in line with Government forecasts, Woods said.
The Government expects to provide a total of $270m to EQC under the Crown guarantee through to mid-2020.
Woods said the Crown guarantee provided important assurance to New Zealanders that the Government stood behind them in a natural disaster, and helped contribute to lower insurance premiums and greater insurance coverage throughout the country.
EQC chief financial officer Chris Chainey said the eventual amount EQC may need under the Crown guarantee was "uncertain" due to a number of factors such as the finalisation of liabilities with insurers and the number of reopened claims.
"To put the $125m [of Crown guarantee payments] in context, it is expected that EQC's total cost for the Canterbury earthquakes will be around $11.5b, and $650m for the Kaikōura earthquake."
The re-repairs are a hangover from the widely criticised managed repair programme run by Fletcher Building. EQC is still considering legal action against Fletcher, but will wait for the outcome of test cases it hopes will clarify liability.
EQC recently secured $6.2b of reinsurance (effectively insurance for insurers) for the next 12 months at a cost of $170m.
It has an excess of $1.75b, the sum EQC is aiming to rebuild its Natural Disaster Fund up to within a decade so it can cover the excess if need be. To speed the process up, EQC insurance levies have quadrupled since the Christchurch earthquakes, with insured homeowners paying 20c per $100 of insurance cover up to a $276 annual cap.
Changes were made to the EQC Act in February which increased EQC's residential building cover from $100,000 to $150,000 and removed its $20,000 of contents cover. The changes come into place in the 12 months from July 2019, as homeowners' insurance policies were renewed.